How tech is changing insurance in Kenya


We all know that insurance touches every aspect of our economy by covering almost any risk that can be measured. However, in Kenya, the insurance growth rate seems to have stagnated.

The total value of insurance premiums as a proportion of Gross Domestic Product (GDP) – is between two to three percent. This doesn’t compare with a country like South Africa at 13 percent, thus showing that we are still far off from one of the countries with the highest penetration rates in the world.

But this can change if the insurance sector in Kenya can harness the potential of data in Insurance management. Since it is no longer a question of whether the Insurance industry should digitize or not, Covid-19 has accelerated the need to digitally transform the sector.

A report by Mckinsey & Company reveals how Insurers collect a wealth of data, but few have found a way to monetize this asset. The new “data as a business” model is pointing out that the sector is on the verge of a new change.

And is entering into a new world of connected cars, connected personas, and connected lives, in which trillions of small things are connected and generating data.

According to the global survey of insurance CEOs conducted by KPMG International in 2020, that since COVID-19 has been the digital catalyst, insurers clearly are needed than ever before. And that the transformation of the sector has been almost universal.

According to 85 percent of Insurance CEOs, COVID-19 has expedited the digitization of its operations and the creation of next-generation operational models. While eight out of ten (78 percent) feel that data has fast-tracked their work toward creating a seamless digital consumer experience.

A similar percentage (79 percent) also believe it has heightened the necessity of developing new company models and revenue streams.

But despite the fact that COVID-19 has brought the digital revolution in insurance closer than before, a large number of Kenyan insurance firms find digitalization overwhelming because it requires significant investment.

In addition to consumer needs for digital experience, the regulatory requirement for capital adequacy (the availability of sufficient capital to prevent a company from failing) is putting a lot of strain. Therefore, absorbing any potential losses is a great challenge under the existing business models.

The current business model that many Kenyan insurers use, is making them be outside of insurance innovation and are now facing the pressure to transform their operating and business models.

And just like FinTechs have disrupted the banking sector, insurtech is about to change the insurance industry. Already, there is the widespread use of Big Data to understand risk, Artificial Intelligence to improve trust, the Internet of Things for insurers to capture real-time driver behaviour and Blockchain to develop parametric products.

InsurTech start-ups and companies that are completely outside the traditional insurance space are encroaching the territory which largely belongs to insurers in the past.

According to Forrester Research Inc., insurtech funding reached $5.3 billion in the third quarter of 2021 and has surpassed $15 billion for the year. This was more than twice the previous year’s funding of $7 that was the all-time high across 377 deals.

In an article for EY on Large commercial insurers and reinsurers must revamp their offerings to better meet the needs of their customers, Isabelle Santenac predicts that modernized technology will enable people to reskill while also fostering a new culture that prioritizes the customer, process efficiency, and operational agility in insurers’ business models during the next decade.

Furthermore, businesses will become much more data-driven and reliant on effective partnerships and collaborations. To counteract competition from smaller players, these qualities will be required.

Santenac sees a highly specialized commercial reinsurance marketplace. A global reinsurer devising innovative risk-transfer solutions with smaller teams, managing general agents (MGAs), and building momentum, while capitalizing on market trends to create and capture profitable niches.

Agile portfolio managers on the other hand are driving capital returns by aggregating strong delegated authority and MGAs/managing general underwriters (MGUs) will find profitable niches.

To respond to some of these challenges, the sector will have to know the customer much more deeply and that requires training on data analytics in order to build predictive models that adequately respond to customer needs. In addition, more resources will be required to meet the challenges and costs of implementing capital adequacy.

With digitalization in insurance permeating almost every process, emerging technologies will play a key role in balancing risk and reward, from policy pricing, claims management and customer service to underwriting and even risk analysis. Technology has disrupted many key functions.